According to a report by Hindu Businessline, the Reserve Bank of India (RBI) is getting ready to implement new regulations for issuing licenses in the point-of-sale (POS) sector, establishing a separate category in financial services.
According to sources quoted in the paper, this action intends to tighten regulation of offline payments, guarantee justice, and provide a level playing field for online and offline payment providers.
Well-known organizations that presently conduct point-of-sale (POS) activities, such as banks and non-banking financial corporations (NBFCs), will not be impacted. Third-party providers, like PineLabs, Paytm, BharatPe, and MSwipe, are anticipated to be affected and will require licenses in order to continue operating.
Examining Market Dynamics
The research noted that the rise in third-party operators in offline payments has made regulatory steps necessary. For more efficient business operations, banks are depending more and more on outside point-of-sale (POS) technologies.
On average, these operators manage ₹400 crore in daily balances; in the internet space, this amount is ₹1,000 crore. Before the offline market grows even further, it is crucial to execute legislative measures, according to an industry insider.
Like payment aggregator license requirements, POS operators might have to fulfill certain standards, like having a minimum net worth of ₹25 crore and abiding by RBI rules.
Problems and Difficulties
Three main issues in the sector are the reasons behind the requirement for a licensing structure. First off, credit card cash loans are becoming more and more common, which causes a large number of one-time transactions at POS terminals. There are concerns regarding KYC procedures and regulatory monitoring because it appears that some businesses may be offering cash in exchange for these transactions.
Second, there are security vulnerabilities due to differences in POS operators' data storage procedures. Different data retention durations—from ninety days to more than a year—emphasize the need for uniformity and adherence to security procedures.
Thirdly, worries about fund administration by outside parties are present. The necessity of regulatory intervention to reduce potential hazards is highlighted by delayed reimbursements to merchants and the possibility of unregulated organizations mismanaging cash.
Even if there haven't been any reports of such incidents, it's still a worry.
If the planned licenses are made essential for offline point-of-sale operations, it is unclear how that will affect companies like Paytm and BharatPe, who are currently awaiting central bank certification for payment aggregator services.
